CBA, NAB to cut savings interest rates

Commonwealth Bank and National Australia Bank are set to cut interest rates on savings accounts by up to 0.25 percentage points in response to last week's reduction in official interest rates, further eroding returns for savers.

CBA, the country's biggest bank, will on Friday announce a drop in the interest rates on at-call savings accounts of between 0.2 and 0.25 percentage points, a move that will be influential in how other banks price deposits.

CBA and NAB are expected to announce cuts to deposit interest rates on Friday.Credit:Josh Robenstone

NAB is also expected to announce cuts in deposit interest rates of up to 0.25 percentage points on Friday.

CBA's popular Netbank Saver account is currently only paying a standard variable rate of 0.5 percentage points — before taking into account the coming cut — a sign of the limits banks will face in trying to cut savings rates further.

A CBA spokesman said: "We regularly review our portfolio of deposit products and have made some changes to our PenSec, GoalSaver and NetBank Saver interest rates to reflect current market conditions, including the record low interest rate environment."

Unlike rivals ANZ Bank and Westpac, CBA and NAB are both passing on last week's 0.25 percentage point cut to their mortgage customers in full.

Deposits are banks' biggest source of funding, so when banks cut their mortgage rates in response to RBA changes, deposit rates must also come down if banks are to maintain their profit margins.

However, the already very low levels of deposit interest rates underlines that banks will struggle to cut these savings rates much further. As a result, analysts say banks will find it increasingly tough to pass on any future cuts in official interest rates to their mortgage customers in full without slashing their margins.

Westpac and ANZ Bank have not announced changes to their variable interest rates and are not expected to make changes on Friday, but all of the lenders are facing the same pressures to pass on the cut to savers.